When people hear the word blockchain, the first thing that pops to mind is cryptocurrency. However, there is more to blockchain than just bitcoin. While bitcoin offered us the first type of blockchain, it also created an endless possibility of blockchain applications in today’s world.
Over the years, numerous industries, like real estate, healthcare, and politics, have adopted blockchain technology. But because each of these industries works uniquely, blockchain technology has evolved into different blockchain types. Before we can discuss the main blockchain types, let’s look at why we need them.
Why Do We Need the Different Blockchain Types?
Blockchain technology was started in 1991 as a way to secure and store digital data. This makes it difficult to change information without an agreement from the different parties that can access the ledger. So, every time you create a record with blockchain technology, it forms a unique block. The block then links into a chain of records, forming a blockchain.
But why do we need blockchain? Here are several key benefits of blockchain technology.
- Blockchain technology helps us in the traceability and verification of multistep transactions.
- It reduces compliance costs, provides secure transactions, and speeds up data transfer processing.
- You can use blockchain technology in voting platforms and managing deeds and titles
- Blockchain is always secure because of its encryption feature.
- It’s an immutable public digital ledger, which means every recorded transaction can’t be modified.
- The authenticity of every transaction done using blockchain technology can be confirmed and verified by participants.
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Now that we know why blockchain is important, let’s look at the four main types.
The first commonly known type of blockchain technology is a public blockchain. This type of blockchain was the origin of cryptocurrency, mainly Bitcoin. It also helped in popularizing distributed ledger technology. So, how does public blockchain work? As its name suggests, public blockchain is publicly accessible, meaning it has no restrictions on who can join and do transactions.
In public blockchains, no user has complete control over the network. This, in turn, helps ensure that data is secure, as no one can manipulate the blockchain.
Advantage: One major advantage this blockchain offers is that it is completely independent of organizations. This means that even when the organization that started it doesn’t exist, the blockchain will continue to run as long as it’s connected to computers. Another benefit of a public blockchain is its transparency. As long as the users follow security protocols, public blockchain is secure.
Disadvantage: Public blockchain networks can be slow.
Use Cases: Some of the common uses of public blockchain include:
- Voting: Countries can vote through public blockchain, which helps employ trust and transparency.
- Fundraising: Initiatives and companies can use a public blockchain for fundraising.
This blockchain network operates in a restrictive environment, hence the name private blockchain. While it does function like a public blockchain in the sense that it uses decentralization and peer-to-peer connection, a private blockchain operates on a much smaller scale. Unlike a public blockchain, only pre-chosen users have permission to access this blockchain.
Private companies or organizations mainly use private blockchains to store sensitive information that only a handful of people can access.
Advantages: The private organization or company sets the security authorizations, permission levels, and accessibility. This means that no third party can access any information. Another advantage is because of their limited size; private blockchains are fast. This makes it easier for them to process transactions faster than public blockchains.
Disadvantage: The source code of private blockchains is usually closed. This makes it difficult for users to confirm or independently audit it.
Use Cases: Private blockchain can be used by companies or businesses not looking to give up their sensitive information to third parties. It can also be used for internal voting, supply chain management, and asset ownership.
As the name suggests, a hybrid blockchain gives you the best of both worlds, as it combines both public and private blockchains. This type of blockchain allows organizations to set up a public permissionless system alongside a private, permission-based system. The result is that organizations can control the specific data stored in the hybrid blockchain and the data opened to the public.
Advantages: Because hybrid blockchains work in a closed ecosystem, it becomes impenetrable to outside attacks. Hybrid blockchain also protects the users’ privacy while allowing for communication between third parties.
Disadvantages: It isn’t completely transparent.
Use Cases: Hybrid blockchain can be used as follows:
- Real estate: It can be used by real estate companies to run their systems.
- Retail: This network helps streamline the retail process.
The last common type of blockchain is consortium blockchain. It is similar to the hybrid blockchain, as it does have public and private blockchain features. However, the major difference is that it works on a decentralized network.
Advantages: A consortium blockchain is more scalable, efficient, and secure. It also offers organizations access controls of the information they make public.
Disadvantages: Unlike a public blockchain, consortium blockchains are less transparent.
Use Cases: You can use consortium blockchain to store research data, banking and payment, and food tracking.
With blockchain becoming popular every day, understanding the different types of blockchains can give you a significant advantage. You can use the information above to create a better transaction record for your business or organization.